Vaughn Palmer: U.S. fires opening salvo on Columbia treaty revenue

Vaughn Palmer, Vancouver Sun columnist11.25.2013

Oregon Senator Ron Wyden, a Democrat, says excessive payments made by the Bonneville Power Administration to British Columbia ensure ‘Northwest ratepayers are paying more for electricity than they ought to.’

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VICTORIA — B.C. should prepare for an American-led effort to claw back most of this province’s cash benefits from the Columbia River Treaty, judging from proceedings earlier this month at a committee of the U.S. Senate.

The senate committee on energy and natural resources held a hearing on the prospects for reopening the cross-border treaty at the first opportunity, namely on its 50th anniversary next September.

The theme of the proceedings on Nov. 7 was very much “blame Canada,” starting with the opening remarks from committee chairman Ron Wyden, Democrat and the senior senator from Oregon.

“The treaty has served both nations well for decades, but after nearly 50 years, it’s time to strike a better bargain,” declared Wyden, before getting to the need to use those talks to redress what he sees as a chronic imbalance in favour of this country.

“Striking a new power-benefit-sharing deal with Canada based on the actual benefits to both nations is the way to proceed. Experts in the region calculate that Northwest ratepayers could save hundreds of millions of dollars if the payments to Canada were recalculated based on the power our region actually receives.”

Those payments, which vary widely from year to year, actually flow to B.C., because this province built a series of dams to meet the treaty’s water-storage and flood-control objectives.

The treaty makers sought to provide B.C. with half of the additional hydroelectric power that could be generated on the U.S. side because water was stored here during the spring freshet and then released at optimum times throughout the year.

But as Wyden noted in his remarks to the committee, much has changed on the U.S. side since the treaty was implemented on Sept. 16, 1964.

“The treaty was drafted based on the outdated assumption that U.S. hydro generation would be operated to maximize power production. That has not been the case for decades. Instead, river operations are often dictated by the need to comply with the Endangered Species Act, the Clean Water Act and other U.S. laws. This change also significantly reduces the actual value of power benefits that under the treaty the U.S. is required to pay Canada for.”

Granted. But none of those changes derives from any failure to live up to the treaty on this side of the border. Nevertheless Wyden argues that because of all the changes on the U.S. side, the Canadian entitlement should be dramatically reduced.

He expanded on the point while questioning committee witness Stephen Oliver, a vice-president of Bonneville Power and coordinator of the treaty review for the U.S. side.

Wyden: “My view is that Northwest ratepayers are paying more for electricity than they ought to due to the excessive size of payments Bonneville and others make to Canada. Give us your assessment of how excessive the payment is?”

Oliver: “We’re presently paying about 90 per cent more than we should be ... In terms of dollars, we feel it is valued in the $25 million to $30 million a year range. We’re paying back $250 million to $350 million worth of power and capacity annually. It’s probably a couple of hundred million dollars range that we’re paying in excess.”

Wyden seized on that last number and ran with it: “Your take is Northwest ratepayers are paying $200 million more than they ought to.” No doubt the senator will press for that to be the opening position for the U.S. side in any treaty talks with Canada.

Even if the Americans choose to proceed on that basis (they’ll make the final call next month), the treaty provides that existing provisions remain in place for another 10 years while the parties work to negotiate a new one.

Plus, it takes two sides to make a treaty and, as Wyden acknowledged, there’s still the far-from-small challenge of persuading the Canadians to agree to renegotiate the downstream benefits: “Of course, we have to convince the Canadians that it is also in their interest to revisit this issue.”

Wyden explored that point further in subsequent questioning of committee witness Thomas Karier from the Northwest Power and Conservation Council, which has a double mandate to hold down electricity prices in the region while promoting environmental and wildlife protection.

Wyden: “What’s in an arrangement for Canada in trying to come together with us on this treaty? What’s do-able here? What’s in Canada’s interest in terms of how we try to strike this bargain and make them more willing to address the concern that Northwest ratepayers are going to have?”

Karier: “We need to start the conversation with a close look at what are the future benefits and future costs of the treaty. When we work together, what’s the net benefit to both countries? How do we split that net benefit? There’s also some benefits to the U.S. of coordinating with Canada on flood risk. We may need to consider purchasing assured flood storage in Canada. If we purchase that benefit ... it should be a fair allocation where they are fairly compensated.”

Easy to say, hard to do, particularly if the U.S. opening position is that the Canadian entitlement should be trimmed back 90 per cent. “This is not going to be for the faint-hearted,” concluded Wyden.

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Vaughn Palmer: U.S. fires opening salvo on Columbia treaty revenue

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